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CBOT defends terms change decision

The Chicago Board of Trade has defended its decision to change the terms of Treasury futures contracts. The original move had generated criticism from users and embarrassed the exchange as it considers a public offering.

Responding to a critical letter sent last week by the Futures Industry Association, the CBOT said the changes were a 'prudent and pro-active initiative' and were based on a 'confluence' of factors, including the low level of Treasury yields, the flatness of the yield curve, unusually small issue sizes of the underlying securities and the 'dramatic' rise in the number of futures contracts traded.

After unusually large settlements of the June contract, which caused hiccups in related Treasury markets, the CBOT introduced position limits for the last 10 trading days of each contract to curb the size of any investors' outstanding holdings and the demand for settlement.